Chinese stocks rallied for the first time in five days on speculation state-backed funds bought shares after data showed signs of a weakening economy.
The Shanghai Composite Index advanced 2.9 percent to 3,170.45 at the close, with almost all of the gains coming in the last hour of trading. Late-day rallies have become a hallmark of government funds intervening to stabilize the equity market. About 32 stocks rose for each that fell on the gauge, while turnover declined to the lowest level in six months. China Citic Bank Corp. jumped 7 percent to lead gains by financial shares, while a measure of technology shares surged 4.7 percent.
China’s government spent 1.5 trillion yuan ($236 billion) trying to shore up its stock market since a rout began three months ago through August, according to Goldman Sachs Group Inc. The Shanghai Composite Index tumbled 40 percent from its June high to erase $5 trillion in value on mainland bourses as leveraged investors fled amid signs of deepening slowdown in the economy.
“Trading is very volatile as the volume is extremely thin,” said Castor Pang, head of research at Core-Pacific Yamichi Hong Kong. “State funds may be focusing the purchase on some large companies including financials and helping with a rebound in the broader market.”
The Shanghai Composite fell as much as 2.3 percent earlier in the day. The Hang Seng Index rose 3.3 percent from a two-year low at Hong Kong, while the Hang Seng China Enterprises Index advanced 4.1 percent, its second only gain in 17 trading sessions.
The value of shares traded on the Shanghai Composite on Tuesday was 80 percent below its June 8 peak, while volume on CSI 300 Index futures contracts shrank on Monday to its lowest level since October 2012 -- and 99 percent below its June high. The China Financial Futures Exchange last week moved to limit trading of stock-index futures by lowering the bar for “abnormal trading” and increased margin requirements and settlement fees.
The country’s outbound shipments dropped 6.1 percent in August in yuan terms from a year earlier, while imports plummeted 14.3 percent, the statistics bureau said Tuesday.
The “national team" expended about 600 billion yuan in August alone, with the total now equivalent in value to 9.2 percent of China’s freely-traded shares, Goldman strategists including Kinger Lau wrote in a report.
Margin traders increased holdings of shares purchased with borrowed money for the first time since Aug. 14 on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising 1.6 percent to 615.9 billion yuan. Leveraged bets on both mainland bourses have fallen by more than half to 975.3 billion yuan from their peak of 2.3 trillion yuan in June.